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Business and Finance
Mon, September 14, 2009 Prospect Capital Corporation: Prospect Capital Announces 31% Year-Over-Year Increase in Net Investment Income for Fiscal Year E
NEW YORK, NY--(Marketwire - September 14, 2009) - Prospect Capital Corporation (
For the year ended June 30, 2009, our net investment income was $59.2 million, or $1.87 per weighted average number of shares for the year, an increase of 31% from the prior year on a dollars basis, and comparable to the prior year per weighted average share amount of $1.91. Our net asset value per share on June 30, 2009 stood at $12.40 per share.
For the quarter ended June 30, 2009, our net investment income was $12.0 million, or 32 cents per weighted average number of shares for the quarter. We estimate that our net investment income for the current first fiscal quarter ended September 30, 2009 will be 25 to 30 cents per share. These temporary per share changes from prior quarters are primarily due to the raising of additional capital to fund the acquisition of Patriot Capital Funding, Inc. (
We expect to announce our first fiscal quarter dividend later this month.
OPERATING RESULTS HIGHLIGHTS Equity Values: Net assets as of June 30, 2009: $532.60 million Net asset value per share as of June 30, 2009: $12.40 Fiscal Year Operating Results: Net investment income: $59.16 million Net investment income per share: $1.87 Dividends declared to shareholders per share: $1.6175 Fourth Fiscal Quarter Operating Results: Net investment income: $11.98 million Net investment income per share: $0.32 Dividends declared to shareholders per share: $0.40625 Fourth Fiscal Quarter Portfolio Activity: Total Portfolio investments at cost: $531.42 million Number of portfolio companies at end of period: 30
PORTFOLIO AND INVESTMENT ACTIVITY
During the year ended June 30, 2009, we completed three new investments in Castro Cheese, TriZetto, and Biotronic, as well as several follow-on investments in existing portfolio companies, totaling approximately $96.3 million.
For the year ended June 30, 2009, we fully exited our investments in Deep Down and Charlevoix, and partially exited our investments in R-V and Diamondback, including full repayment of the Diamondback loan.
As of June 30, 2009, we held 30 portfolio company investments aggregating approximately $547.2 million. Since June 30, 2009, two additional investments, Peerless and C&J, have been repaid, generating a 19% cash-on-cash internal rate of return in each case, not including a 40% equity stake which we continue to hold in C&J.
On August 3, 2009, we announced our entering into a definitive agreement to acquire Patriot, including assets with an amortized cost of approximately $311 million, for a purchase price of approximately $197 million, or 63% of amortized cost. We are purchasing Patriot with our common stock plus cash to repay all Patriot debt, anticipated to be approximately $110.5 million when the acquisition closes. Our common shares will be exchanged at a ratio of approximately 0.3992 for each Patriot share, or 8,616,467 shares of our common stock for 21,584,251 Patriot shares, with such exchange ratio decreased for any tax distributions Patriot may declare before closing. We expect significant accretion of this discount on a quarterly basis and anticipate a majority of this accretion to be income not subject to Prospect shareholder taxation. We are basing our net investment income accretion assumptions assuming no early repayments. Early repayments would accelerate the recognition of such accretion income.
The Patriot acquisition reflects our previously articulated strategy of identifying and closing on opportunities created by the marketplace credit dislocation, including opportunities to acquire financial companies and portfolios with attractive assets but with liquidity issues created by lenders seeking immediate payment. We are currently evaluating a number of other portfolios, both public and private, where our ability to provide liquidity has the potential for significant reward.
In addition, the Patriot acquisition will approximately double our number of portfolio companies to approximately 60 companies, thereby expanding our diversification by company, by industry, by geography, and by business owner. Approximately 70% of the acquired asset value is in companies where Patriot has a senior secured position. Our gross assets will also expand by more than 30%, providing anticipated scaling benefits as a consolidator in the industry.
LIQUIDITY AND FINANCIAL RESULTS
On June 25, 2009, we completed a first closing on an expanded $250 million syndicated revolving credit facility (the "Facility"). The new Facility, for which lenders have closed on $175 million to date, includes an accordion feature which allows the Facility to accept up to an aggregate total of $250 million of commitments for which we continue to solicit additional commitments from other lenders for the additional $75 million. The revolving period of the Facility extends through June 2010, with an additional one year amortization period after the completion of the revolving period. The maturity date of the facility is June 2020. Interest on borrowings under the credit facility is one-month LIBOR plus 400 basis points, subject to a minimum Libor floor of 200 basis points. The facility has an investment grade Moody's rating of A2.
We expect to close on an additional lender commitment, for which lender credit committee approval has already occurred but for which signed documentation has not yet been received, in the next 30 days, bringing our facility size to $195 million and our number of lenders to five, providing counterparty diversification benefits.
As of June 30, 2009, we had $124.8 million outstanding under our credit facility. We currently have zero outstanding borrowings in our facility, as well as cash-equivalent instruments of approximately $60 million. Our unleveraged balance sheet is a source of significant strength in comparison with many overleveraged competitors. Our equitized balance sheet also gives us the potential for future earnings upside as we prudently grow our revolving credit facility and evaluate term debt solutions driven by our Facility's investment grade facility rating.
We also continue to generate liquidity through stock offerings and the realization of portfolio investments. On March 19, April 27, May 26, July 7, and August 20, 2009, we completed stock offerings aggregating 21,567,186 shares of our common stock, raising approximately $180.7 million in gross proceeds.
In the second quarter of the fiscal year ended June 30, 2009, we announced the authorization by our board of directors to repurchase up to $20 million of our outstanding stock. To date, we have not made any such repurchases, but we continue to maintain the flexibility to do so should we deem such purchases to be in the best interest of our shareholders.
On April 30, 2009, we gave a 60-day notice to Vastardis Fund Services LLC ("Vastardis") regarding termination, effective June 30, 2009, of the agreement with Vastardis to provide sub-administration services. The prior cost of this agreement had been approximately $700 thousand per annum based on approximately $600 million of assets. With our chief financial officer having expanded his finance and administration team in recent months, we no longer require any services from Vastardis.
CONFERENCE CALL
The Company will host a conference call on Tuesday, September 15, 2009, at 11:00 a.m. Eastern Time. The conference call dial-in number will be 800-860-2442. A recording of the conference call will be available for approximately 30 days. To hear a replay, call 877-344-7529 and use passcode 433827.
PROSPECT CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES June 30, 2009 and 2008 (in thousands, except share and per share data) June 30, 2009 June 30, 2008 (Audited) (Audited) -------------- -------------- Assets Investments at fair value (cost of $531,424 and $496,805, respectively) Control investments (cost of $187,105 and $203,661, respectively) $ 206,332 $ 205,827 Affiliate investments (cost of $33,544 and $5,609, respectively) 32,254 6,043 Non-control/Non-affiliate investments (cost of $310,775 and $287,535, respectively) 308,582 285,660 -------------- -------------- Total investments at fair value 547,168 497,530 -------------- -------------- Investments in money market funds 98,735 33,000 Cash 9,942 555 Receivables for: Interest, net 3,562 4,094 Dividends 28 4,248 Loan principal -- 71 Other 571 567 Prepaid expenses 68 273 Deferred financing costs 6,951 1,440 -------------- -------------- Total Assets 667,025 541,778 -------------- -------------- Liabilities Credit facility payable 124,800 91,167 Dividends payable -- 11,845 Due to Prospect Administration 842 695 Due to Prospect Capital Management 5,871 5,946 Accrued expenses 2,381 1,104 Other liabilities 535 1,398 -------------- -------------- Total Liabilities 134,429 112,155 -------------- -------------- Net Assets $ 532,596 $ 429,623 ============== ============== Components of Net Assets Common stock, par value $0.001 per share (100,000,000 and 100,000,000 common shares authorized, respectively; 42,943,084 and 29,520,379 issued and outstanding, respectively) $ 43 $ 30 Paid-in capital in excess of par 545,707 441,332 Undistributed net investment income 24,152 1,508 Accumulated realized losses on investments (53,050) (13,972) Unrealized (depreciation) appreciation on investments 15,744 725 -------------- -------------- Net Assets $ 532,596 $ 429,623 ============== ============== Net Asset Value Per Share $ 12.40 $ 14.55 ============== ============== PROSPECT CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months and the Year Ended June 30, 2009 and 2008 (in thousands, except share and per share data) (Unaudited) For The Three Months Ended For The Year Ended June 30, June 30, ------------------ ------------------ 2009 2008 2009 2008 -------- --------- -------- -------- Investment Income Interest Income Control investments $ 1,981 $ 7,020 $ 19,281 $ 21,709 Affiliate investments 674 246 3,039 1,858 Non-control/Non-affiliate investments 9,409 9,229 40,606 35,466 -------- --------- -------- -------- Total interest income 12,064 16,495 62,926 59,033 -------- --------- -------- -------- Dividend income Control investments 8,900 4,377 22,468 11,327 Money market funds 60 149 325 706 -------- --------- -------- -------- Total dividend income 8,960 4,526 22,793 12,033 -------- --------- -------- -------- Other income: Control/affiliate investments 418 913 1,249 1,123 Non-control/Non-affiliate investments 358 1,514 13,513 7,213 -------- --------- -------- -------- Total other income 776 2,427 14,762 8,336 -------- --------- -------- -------- Total Investment Income 21,800 23,448 100,481 79,402 -------- --------- -------- -------- Operating Expenses Investment advisory fees: Base management fee 3,175 2,555 11,915 8,921 Income incentive fee 2,995 3,417 14,790 11,278 -------- --------- -------- -------- Total investment advisory fees 6,170 5,972 26,705 20,199 Interest and credit facility expenses 1,333 1,599 6,161 6,318 Sub-administration fees (including former Chief Financial Officer and Chief Compliance Officer) 202 239 846 859 Legal fees 357 279 947 2,503 Valuation services 144 146 705 577 Audit, compliance and tax related fees 167 122 1,015 470 Allocation of overhead from Prospect Administration 1,092 1,031 2,856 2,139 Insurance expense 61 64 246 256 Directors’ fees 65 88 269 253 Other general and administrative expenses 228 239 1,035 715 Excise taxes -- -- 533 -- -------- --------- -------- -------- Total Operating Expenses 9,819 9,779 41,318 34,289 -------- --------- -------- -------- Net Investment Income 11,981 13,669 59,163 45,113 -------- --------- -------- -------- Net realized (loss) gain on investments (40,739) 2,191 (39,078) (16,222) Net change in unrealized appreciation/depreciation on investments 28,009 8,126 15,019 (1,300) -------- --------- -------- -------- Net (Decrease) Increase in Net Assets Resulting from Operations $ (749) $ 23,986 $ 35,104 $ 27,591 ======== ========= ======== ======== Net (decrease) increase in net assets resulting from operations per share $ (0.02) $ 0.88 $ 1.11 $ 1.17 ======== ========= ======== ======== Dividends declared per share: $ 0.41 $ 0.40 $ 1.62 $ 1.59 ======== ========= ======== ======== PROSPECT CAPITAL CORPORATION AND SUBSIDIARY ROLLFORWARD OF NET ASSET VALUE PER SHARE For the Three Months and the Year Ended June 30, 2009 and 2008 (in actual dollars) (Unaudited) For the Three Months Ended For the Year Ended -------------------- -------------------- June 30, June 30, June 30, June 30, 2009 2008 2009 2008 --------- --------- --------- --------- Per Share Data: Net asset value at beginning of period $ 14.19 $ 14.15 $ 14.55 $ 15.04 Costs related to the secondary public offering -- (0.07) -- (0.07) Net investment income 0.32 0.50 1.87 1.91 Net realized (loss) gain (1.10) 0.08 (1.24) (0.69) Net unrealized appreciation (depreciation) 0.75 0.30 0.48 (0.05) Net (decrease) increase in net assets as a result of public offerings (1.76) -- (2.11) -- Dividends recognized -- (0.41) (1.15) (1.59) --------- --------- --------- --------- Net asset value at end of period $ 12.40 $ 14.55 $ 12.40 $ 14.55 ========= ========= ========= =========
ABOUT PROSPECT CAPITAL CORPORATION
Prospect Capital Corporation ([ www.prospectstreet.com ]) is a closed-end investment company that lends to and invests in private and microcap public businesses. Our investment objective is to generate both current income and long-term capital appreciation through debt and equity investments.
We have elected to be treated as a business development company under the Investment Company Act of 1940 ("1940 Act"). We are required to comply with a series of regulatory requirements under the 1940 Act as well as applicable NASDAQ, federal and state rules and regulations. We have elected to be treated as a regulated investment company under the Internal Revenue Code of 1986. Failure to comply with any of the laws and regulations that apply to us could have an adverse effect on us and our shareholders.
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, whose safe harbor for forward-looking statements does not apply to business development companies. Any such statements, other than statements of historical fact, are highly likely to be affected by other unknowable future events and conditions, including elements of the future that are or are not under our control, and that we may or may not have considered; accordingly, such statements cannot be guarantees or assurances of any aspect of future performance. Actual developments and results are highly likely to vary materially from these estimates and projections of the future. Such statements speak only as of the time when made, and we undertake no obligation to update any such statement now or in the future.
